Remortgages vs. homeowner loans

Everyone knows exactly what an unsecured loan is because of the fact that the majority of people prefer to have a loan that does not put their home in jeopardy. However, many individuals that do have to offer their home as security when taking out a loan have no idea what kind of homeowner loans are out there. In fact, a good number of people think that there is only one, when in fact there are several types that can be taken.

There is very little difference between a remortgage and a secured loan in terms of the security offered, but the differences that do exist can make quite a big impact on a homeowners decision as to which type of the available homeowner loans to take out.

A remortgage can be characterised by an entirely new mortgage being taken out or a further advance. The latter is simply a release of equity by the mortgage provider on top of the original mortgage. A new mortgage account is actually a brand new mortgage that actually pays off the original mortgage but allows further borrowing as well, with the two equalling up to the total amount of the value of the house. Both are effective homeowner loans, but have a major downside.

If you do take out a remortgage then you will be placed on current interest rates and have to pay the fees associated with it. On the other hand, homeowner loans have no associated fees and do not require all of the paperwork that goes along with a remortgage.

Homeowner loans operate under the same principle as remortgages, but are slightly different in that they are actually separate from the mortgage. If there is a chance that you may be able to pay back the loan early then it is perhaps better to keep the two separate or risk incurring charges upon redemption. Homeowner loans are also better for smaller amounts, up to approximately £25,000.

Depending on requirements, remortgages and homeowner loans tend to suit different situations. You would need to assess your wants and needs before deciding either way.

About the Author

Jason Hulott is Business Development Director at Debt Consolidation Loans service, PolarLoans. Visit Polar Loans now for more information about Homeowner and Secured Loans.